Think Tank: The big challenge facing SMEs keen to come back to the UK
is how to find and access the resources they need in a painless way, writes Rachel
Bridge.

When Rob Knight started his business, Ecoegg, selling environmentally-friendly cleaning gadgets in 2008, he initially had them manufactured in China because it was 40pc cheaper than having them made in the UK.

Last year, he moved the manufacturing to the UK after realising that, not only had the difference between China and UK production costs significantly narrowed, there were also many other benefits to having his products made locally.

It was by no means a straightforward switch. In China, Knight used a single factory which delivered a finished product; in the UK he was unable to find one factory able to make his gadgets at a competitive price.

Now he has 12 different suppliers in the UK making individual parts for his products, which are then assembled in Swindon.

He says of the increased workload: “Our business has become much more complicated by doing this. Before, we could send one email to our supplier in China with an order for 10,000 units, whereas now we have had to take on two people just dedicated to logistics.

“The upside is control over quality. We are able to drive down the road and see our manufacturing partners.”

There have been other benefits to moving back to Britain. Production lead times have been reduced from 12 weeks to 10 days and payment terms are significantly better – in China, Knight had to pay upfront, whereas in the UK he gets credit terms of 30 or 60 days.

“It was the best thing we could have possibly done,” he said. “We are an eco-friendly company making eco-friendly products and shipping goods halfway round the world was just not the right thing to do. We are really proud of being able to say we are made in the UK.”

The business now has a turnover of £1.1m and Ecoegg products are sold in Argos and Tesco.

Knight is not alone in bringing his manufacturing process home. A growing number of SMEs are choosing to do the same, in a move known as “reshoring”, as the costs of manufacturing in China and the Far East rise and the benefits of being close to the factory become more appealing.

According to the Engineering Employers Federation, around 15pc of British firms are bringing some or all of their manufacturing home.

The good news for SMEs looking to reshore – whether by setting up their own operation or by outsourcing to existing manufacturers – is there is still much manufacturing expertise in the UK.

While large-scale “metal bashing” manufacturing may have largely disappeared, specialist high-value manufacturing is on the rise, with regional clusters of expertise emerging.

Dr Mark Swift, head of small business programmes at Warwick Manufacturing Group at Warwick University, said: “There are more than 600 advanced manufacturing companies in the Warwickshire area alone and the capability is staggering, from high-precision engineering to products measuring energy usage in buildings.”

Most of those firms, he said, manufacture for other businesses, a pattern echoed elsewhere, making it theoretically straightforward for small firms which outsource manufacturing overseas to make the switch.

The big challenge facing SMEs keen to come back to the UK is how to find and access the resources they need in a painless way.

Although the Government provides some financial support through its Regional Growth Fund and the Advanced Manufacturing Supply Chain Initiative, it is clear that a more co-ordinated knowledge-based approach is needed. SMEs need to be matched with existing manufacturing firms in the UK which can make what they need.

Neil Sevitt, head of SMEs at RSM Tenon, an accountancy firm, said: “There are quite a lot of hoops to jump through and maybe the Government needs to think about making it easier.”